Debt mutual funds collected ₹1.1 lakh crore in three months ended June 2020. The inflows were mainly driven by investments in liquid schemes and banking and PSU funds. The debt mutual fund category witnessed massive redemption worth ₹1.13 lakh crore in the preceding quarter.
Most debt fund categories saw inflows except for credit risk, overnight, ultra-short duration, medium duration and dynamic bond funds. These categories saw net outflows during the quarter ended June.
According to Amfi, the positive inflows pushed the asset base of debt mutual funds to ₹11.63 lakh crore at June-end from ₹11.5 lakh crore at the end of March.
Nearly 80% of the total inflows during the quarter under review in the fixed-income segment came through liquid funds, where most of the institutional money is parked, says a PTI report.
Liquid funds witnessed net inflows amounting to ₹86,493 crore during the quarter under review. The segment had witnessed an outflow of ₹94,180 crore in the March quarter, typically due to advance tax payment requirements.
In addition, banking and PSU category, which is considered as a safe option, received inflows of ₹20,912 crore in the quarter ended June 2020, compared to a withdrawal of ₹66 crore in the previous three months.
Accoring to Sebi, banking & PSU funds have to invest a minimum 80% of their total assets in debt instruments of banks, public sector undertakings, or public financial institutions. This makes the category of investment relatively safer than some of the other fixed-income categories in terms of credit risk.
Further, investors poured in ₹18,738 crore in corporate bonds.
However, credit risk funds, which invest 65% of the investment corpus in less than AA-rated paper, saw an outflow to the tune of ₹25,905 crore.
Such funds witnessed a pull out of ₹19,239 crore in April, ₹5,173 crore in May and ₹1,494 crore in June.
Huge outflow in April was mainly due to redemption pressure and lack of liquidity issues. Moreover, shutdown of six debt schemes by Franklin Templeton Mutual Fund added to the woes, says PTI.
“Given the recent credit crisis that adversely impacted fixed-income markets, investors continue to tread a line of caution by staying away from riskier investments. Hence categories such as credit risk and medium duration, which also comprise funds that take credit bets, continue to witness net outflow,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
On the other hand, funds that do not cut corners with credit risk, especially from categories such as money market, short duration, corporate bond and banking and PSU, continue to gain investor traction, he added.
Equity-oriented mutual funds saw net inflows worth ₹11,710 crore in equity-oriented mutual funds during the June quarter, against an investment of ₹30,703 crore in the preceedi quarter.
The slump was mainly on account of market volatility and uncertain economic environment due to the COVID-19 pandemic.